FinTechs Leading the Digital Lending Revolution: Report

A recent report by the Fintech Association for Consumer Empowerment (FACE) highlights the significant role of fintechs in driving financial inclusion in the personal loan market in India. The report, titled “Fintech Personal Loans,” analyzes data from 71 fintech NBFCs over a six-year period (April 2018 – March 2024).

Key Findings:

• Increase market share: Fintech NBFCs sanctioned around 9 crore loans worth Rs 98,111 crore in FY23-24, capturing a significant 65% of the loan volume AND 11% of the loan value in the personal loan market. This is a substantial increase from their 30% volume share and 4% value share in FY18-19.
• Champion of financial inclusion: FinTechs are making credit more accessible, with borrowers coming from 717 districts in 35 states and union territoriesNotably, more than a third of loan applicants are from Tier III cities and above, highlighting the impact on underserved areas.
• Focus on the younger generations: Over two-thirds of the value of loans sanctioned in FY23-24 went to borrowers below the age of 35, demonstrating a strong focus on the growing youth population.
• Responsible growth: Fintech lending is seeing an increase in ticket sizes, credit bureau age and risk profiles. More than half of the sanctioned value is coming from borrowers with larger ticket sizes (> Rs 50,000), longer credit history (over 5 years) and low to medium credit risk.
• At the service of the less well-off: Fintechs are primarily targeting the aspirational mass market with an annual household income of Rs 3-12 lakh. While the average note size is around Rs 11,000, with half of that going to loans below Rs 50,000, the overall composition is diverse, also reflecting a focus on smaller loans.
• Improve portfolio quality: The sector demonstrates a commitment to responsible lending with a default rate (DPD 90+) of just 3.5% as of March 2024.

Industry Leader Perspective:

Sugandh Saxena, CEO of FACE, highlights the importance of responsible innovation and using data to build customer trust. He stresses the need for a supportive regulatory environment and continued technological advancements to ensure the sustainable growth of the industry.

Meaning of the report:

This report highlights the crucial role of fintechs in expanding financial inclusion and making personal loans more accessible to a larger segment of the Indian population, especially the youth and those living in Tier III cities and beyond. While the sector shows promising growth and responsible practices, a continued focus on innovation and responsible lending will be critical to its future success.

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